Bill Yates is the President of Give-It-All-Away Charities. The charity produces

Question

Bill Yates is the President of Give-It-All-Away Charities. The charity produces packs of daily AIDS drugs for export to poor villages in Africa. They currently produce 1000 packs a day with the following resources:

Current:

Labor


450 labor hours per day @ $17.00 per hour

Materials


$20,000 per day

Energy


$6,000 per day

Regulatory fees


$12,000 per day



a) What is the labor productivity for the packs of AIDS drugs? Express this in units per labor hour.

b) What is the multifactor productivity for the packs of AIDS drugs?

Part B:

By using a different energy source, energy costs can be reduced by $1000 per day.

c) What is the new multifactor productivity?

Part C:

By outsourcing to Africa, he could avoid the Regulatory fees. However, the output will drop to only 900 packs per day. Mr. Yates would continue to pay the same $17.00 per hour for labor to provide a living wage (and he wants to give it all away!) Base all other costs off of the "current" plan, i.e., don't change energy costs or anything else.

d) What is the multifactor productivity now?

e) What is the percent increase between b (the original) and d (the outsourced) scenario?

What is the labor productivity for the packs of AIDS drugs? Express this in units per labor hour. Don't type the units per hour. Format as x.xx

What is the multifactor productivity for the packs of AIDS drugs? This will be in packs per dollar, don't type that. Format as x.xxxx

Explanation / Answer

a) 1000/450= 2.22 units/hour Formated as suggested at bottom 2.22 b) ($7650 + $20000 + $6000 + $12000)/1000 units = $45650/1000 = $45.65 per pack Formated as suggested at bottom 45.65 c) $44650/1000 = $44.65 per pack Formated as suggested at bottom 44.65 d) (7650 + 20000 + 6000)/900 units = $33650/900 = $37.39 per pack Formated as suggested at bottom 37.39 e) $45.65/$37.39 = 22% increase

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